When economic policies are geared towards bolstering particular regimes the economy goes under and the common man suffers. To gain popularity, Musharraf pursued a consumption based growth policy ignoring long gestation power generation projects.
On paper there was seven percent growth, there were millions of new mobile phone users, thousands of new motorbikes and cars on the roads, the later mostly financed through cheap bank loans. Despite gas being in shortage, gas connections were extended to small towns and promised to villages. It was a jobless growth, with hardly any trickle down effect. The policy led to an increasing gap between the richest and the poorest sections of society causing suffering, frustration and anger.
The present government adopted the policy of reconciliation that required concessions to powerful groups. Despite a dire need to raise taxes, it declined to bring agricultural income under the tax net, implement the RGST, reform the petroleum sector taxation, privatize the white elephants among the public sector enterprises and resolve the issue of circular debt.
It took a populist stand on power sector subsidy which now consumes Rs 140 crore a day. Despite many ministries having been devolved to the provinces, the size of the federal cabinet remains unwieldy to oblige a number of allies.
The way demands of the MNAs for funds are being met indicates that fiscal indiscretion is likely to increase in months leading to the elections. The government borrowing, meanwhile, has continued on a high trajectory. In FY 2011-12, the borrowing for budgetary support hit a new peak of Rs 1.231 trillion, up by 75 percent, because of rising fiscal deficit.
Thanks to Musharraf’s policies and the subsequent failure of the PPP government to remedy the situation, industrial units cannot work at full capacity due to gas and power shortages. Can Hafeez Sheikh attract Japanese investors when local industrialists are shifting to other countries?
Populist policies, reckless borrowing and ruthless spending are bound to lead the country again to the parlor of the IMF. As the current fiscal year is likely to see three governments, the incumbent, the caretaker and the new government, the IMF would in all probability keep Islamabad waiting till a new administration is in place.
Unlike fiscal year 2007-08, when there were few borrowers, this time conditions imposed on Pakistan would be as stringent as those on European borrowers. Unless the governments are willing to formulate policies keeping in view the long term interests of the country, there is going to be no end to the economic suffering of the people. – PT